March 17, 2023

SVB: US banks unite to pump $30bn into First Republic

SVB: US banks unite to pump $30bn into First Republic

By Biodun Busari

Foremost banks in the United States have joined forces to deposit $30 billion into First Republic Bank in a bid to reinforce its finances and manage the effect of the collapse of two big lenders, Silicon Valley Bank and Signature Bank, in the past week.

According to a report by Proactive Investors in the United Kingdom, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will each credit the California-based lender, First Republic with $5 billion.

Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) will add $2.5 billion each while BNY Mellon (NYSE: BK), PNC Bank, State Street, Truist and US Bank are coughing out $1 billion apiece as part of the arrangement.

“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a statement on Thursday.

Some investors were not impressed. Hedge fund manager Bill Ackman wrote on Twitter that the coordinated effort to strengthen the First Republic was a “fictional vote of confidence” and that “FRB default risk is now being spread to our largest banks”.

Also, in a sign of the turmoil in the banking sector, the Federal Reserve lent $160 billion during the week of March 15 across its discount window and new emergency facility.

Figures published by the US central bank on Thursday revealed usage for the discount window had jumped to a record high of $152.85 billion, a surge of $148.3 billion in the five days to Wednesday.

Lenders also borrowed $11.9 billion from the Fed’s Bank Term Funding Program, a new scheme inaugurated on Sunday.